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Greenland Minerals gets target price hiked by Euroz after regulatory de-risking of Kvanefjeld

The Kvanefjeld project is forecast to produce all commercially important rare earth elements including neodymium, praseodymium, terbium and dysprosium, over an initial 37‐year mine life.

Greenland Minerals Ltd - Greenland Minerals gets target price hiked by Euroz after regulatory de-risking of Kvanefjeld
Confirmation that the Kvanefjeld EIA meets Greenland guidelines is a major project milestone

Greenland Minerals Ltd (ASX:GGG) recently reached an important milestone in the permitting progress for its Kvanefjeld Rare Earth Project, with the Environmental Impact Assessment (EIA) accepted for public consultation.

Greenland’s Environmental Agency for Mineral Resource Activities (EAMRA) has advised the company that the independent scientific reviews of the Kvanefjeld EIA and supporting studies have concluded.

Following this update, West Australian based stockbroker Euroz has increased its 12-month price target for GGG to 52 cents per share (current share price: 28 cents) owing to the regulatory de-risking of the project and revision of key assumptions within Euroz’s financial model.

The following is an extract from the research update:

Investment case

The long-awaited approval of the Kvanefjeld EIA marks a significant de-risking milestone for the project, particularly considering its original lodgement in late CY15. The downstream processing capabilities of GGG’s big brother and top shareholder in Shenghe Resources provides a tangible avenue to market for 32ktpa of mixed rare earth concentrate from Kvanefjeld, an avenue which we highlight is unshared by GGG’s ASX-listed peers. Whilst acknowledging the hurdles that remain to a shovel-ready Kvanefjeld, we continue to view GGG as materially undervalued on account of the project’s robust economics and upside potential of the establishment of rare earth separation capacity in Europe. We maintain our Speculative Buy recommendation and increase our 12-month Price Target to $0.52/sh owing to the regulatory de-risking of the project and revision of key assumptions within our financial model.

Key points

  • The Kvanefjeld EIA has been assessed to meet the requirements for public consultation by Greenland’s Environmental Agency for Mineral Resource Activities;
  • A public consultation phase will be scheduled upon completion of the translation of the EIA report to Greenlandic and Danish versions;
  • The project’s sovereign risk has been largely assuaged following increased vocalism on the desire for economic independence through the development of natural resources (see article from three GoG ministers here);
  • We conservatively retain the risk-adjustment factor of 40% applied to our valuation of Kvanefjeld until the mining license is in hand;
  • We call attention to the highlights of the Kvanefjeld project and Optimised Feasibility Study released in Oct’19:
    • Significant >1 billion tonne polymetallic resource containing >11Mt REO, 593Mlbs U3O8 and 2.4Mt Zn;
    • Scale and longevity offered by a 37-year mine life based on a maiden 108Mt Reserve, equivalent to only 10% of the global resource;
    • Greenlandic unit operating costs of <US$4/kg REO facilitated by material U3O8, Zn and fluorspar by-product credits and a relatively simple flowsheet on account of the deposit’s steenstrupine mineralogy;
  • Conservative estimates indicate the potential to generate average annual EBITDA of >$320m across the LoM;
  • We align our 12-month Price Target with our revised and risk-adjusted NPV10 valuation;
  • Beyond the award of the mining license, continued technical derisking of the project, tightening RE market dynamics and continued geopolitical tensions involving China’s domination of RE production and separation remain as key near term catalysts.

Quick facts: Greenland Minerals Ltd

Price: 0.3 AUD

ASX:GGG
Market: ASX
Market Cap: $359.18 m
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